American Council of Life Insurers 

101 Constitution Avenue, NW, Washington, DC 20001-2133

www.acli.com 

James Szostek 

Vice President, Taxes & Retirement Security

(202) 624-2378 t (866) 953-4149 f jimszostek@acli.com

Howard Bard 

Vice President, Taxes & Retirement Security

(202) 624-2028 t (866) 953-4149 f howardbard@acli.com

Submitted Electronically

September 24, 2015

Office of Regulations and Interpretations 

Office of Exemption Determinations

Employee Benefits Security Administration 

Attn: Conflict of Interest Rule

U.S. Department of Labor

200 Constitution Avenue, NW

Washington, DC 20210 

Subject: Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement Investment Advice 

(RIN 1210-AB32); 

 Proposed Amendment to and Proposed Partial Revocation of Prohibited Transaction 

Exemption (PTE) 84-24 for Certain Transactions Involving Insurance Agents and Brokers, 

Pension Consultants, Insurance Companies and Investment Company Principal Underwriters 

(RIN 1210-ZA25); and 

 Proposed Best Interest Contract Exemption (RIN 1210-ZA25) 

 

Greetings: 

On behalf of the American Council of Life Insurers (“ACLI”)1, we offer additional comments on the 

Department of Labor’s (“Department”) proposed rule and prohibited transaction exemptions 

promulgated under Sections 3(21)(A)(ii) and 2510.3-21 of the Employee Retirement Income Security Act 

(“ERISA”)(collectively, the “Proposal”). In addition to this letter, please see the comments provided in our 

letter of July 21, 2015 (“Letter”) as well as the testimony delivered by ACLI staff at the Department’s 

public hearing on August 11th and 12th. 

We reiterate our concern that, absent the significant changes identified in our Letter, the Proposal would 

cause irreparable harm to small balance retirement plan investors, including many middle and lower 

income investors. More specifically, the Proposal would effectively limit or deny access to guaranteed 

 1 The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with 284 member companies 

operating in the United States and abroad. ACLI advocates in federal, state, and international forums for public policy that 

supports the industry marketplace and the 75 million American families that rely on life insurers’ products for financial and 

retirement security. ACLI members offer life insurance, annuities, retirement plans, long-term care and disability income 

insurance, and reinsurance, representing more than 90 percent of industry assets and premiums. ACLI member companies 

offer insurance contracts and other investment products and services to qualified retirement plans, including defined benefit

pension and 401(k) arrangements, and to individuals through individual retirement arrangements (IRAs) or on a non-qualified 

basis. ACLI member companies also are employer sponsors of retirement plans for their own employees.
2

income products that are increasingly important to millions of Americans who no longer have access to a 

traditional pension. 

Section I of this letter provides suggested revisions to the “Definition of the Term Fiduciary.” Section II 

provides suggested simplifications and revisions to the proposed “Best Interest Contract Exemption.” 

Section III provides post-hearing observations on the Regulatory Impact Analysis, responds to questions 

posed by the Department during the hearings relating to arbitration, and provides observations about 

the four additional research papers posted by the Department on its website subsequent to the close of 

the prior comment period and public hearings.

I. Revise the Fiduciary Definition 

 

A. Provide Clarification Regarding Coverage of Welfare Benefit Plans 

Under the Proposal, a person is a fiduciary if the person provides a “Recommendation” for a fee to a 

“Plan” on the advisability of acquiring “property.” The Proposal defines “Plan” to include any employee 

benefit plan as defined in ERISA §3(3). This definition includes welfare benefit plans. A disability 

income insurance contract issued to an employer-sponsored welfare benefit plan is “property.” Thus, 

the Proposal arguably would include recommendations regarding the acquisition of a disability income 

insurance contract by a welfare benefit plan. At the hearing, we heard DOL staff note that the Proposal 

was not drafted with the intent to cover all welfare benefit plans, but only instances in which advice is 

provided regarding the investments of assets held in a welfare benefit plan trust or with respect to the 

investment of certain welfare benefit products that include variable investment features. Our letter 

offered revisions to refine the proposed definition of fiduciary to clearly focus on advice regarding 

retirement plan assets when there is a mutual relationship of trust and an expectation of impartiality. 

More specifically, our Letter includes recommended changes to the rule that would narrow the language 

of the rule to address advice regarding investments and a recommendation that, given the lack of 

analysis and explanation regarding the Proposal and its impact on welfare benefit plans, the Department 

exclude these plans from this rulemaking effort.

B. Broaden the Seller’s Exception to Cover Wholesale Activities 

We seek a seller’s exception that provides a clear path for sales/marketing activities with all investors. 

The Proposal broadly includes routine sales “suggestions” that naturally include a “call to action” as it 

were. Thus, it was necessary for the Department to include a counter-party carve out or sales exception, 

which, as we noted in our Letter, is far too narrow. 

At the hearing, concerns were raised regarding the scope of the definition and its application to 

wholesale marketing activities. In response, DOL staff acknowledged wholesaling was “kind of a new 

concept that maybe we haven’t explored.” 

Under the terms of the Proposal, it is not unreasonable to conclude that efforts on the part of an insurer 

to make arrangements with a wholesaler for the sale of its insurance products to plans and IRAs would 

be considered fiduciary advice when the wholesale intermediary is a fiduciary to plans and IRAs by 

reason of the application of the Proposal or otherwise. This must be addressed. Any final rule should 

clearly exclude from the definition of fiduciary an insurer’s arm length sales activities with an 

intermediary to a plan or IRA, even if such intermediary is a fiduciary by reason of the Proposal.

C. Revise the definition of “Recommendation” 

At the hearing, the Department reiterated its query in the Executive Summary of the Proposal as to 

whether it should adopt some or all of the standards developed by FINRA in defining the term 
3

“Recommendation” under the proposal. The Investment Advisers Act predates ERISA by more than three 

decades. As there was existing law in place, it is not surprising that Congress included no more than a 

single phrase regarding “investment advice” in ERISA. A uniform definition of the term 

“recommendation” would provide investors certainty, simplify the administration of the rule, and be 

consistent with the application of law. Thus, we recommend the Department incorporate by reference 

FINRA guidance as the basis for the definition of the term “Recommendation.” 

 

D. Retain All Current Elements of Interpretive Bulletin 96-1 in the Investment Education Carve-out 

We reiterate our concerns regarding the Department’s proposed restrictions within the Proposal’s 

investment education carve-out. Our Letter offered specific suggestions for improving this carve-out, 

including elimination of the requirement to avoid specificity regarding investments in asset allocation 

models and interactive materials as well as specificity regarding distribution options and annuity 

features in interactive materials. The Department’s proposed replacement of Interpretive Bulletin (“IB”)

96-1 with a more restrictive carve-out renders it only marginally useful. 

It is clear from the written comments and hearing testimony of financial service providers and 

organizations representing plan sponsors that IB 96-1 serves a crucial and significant role to ensure

participants have access to meaningful investment-related educational materials and programs. The 

Department has not established a basis for the proposed more restriction regulation. The Regulatory 

Impact Analysis does not discuss or describe any empirical evidence to support such a change. We 

seek a broad investment education carve-out that would preserve IB 96-1 in its entirety, expand the 

availability of distribution guidance, include education regarding features inherent in previously 

purchased products, and include “anti-cashout” intervention education.

II. Exemptive Relief for Fiduciaries 

 

We seek workable, administrable compensation exemptions that support the variety of annuity 

distribution models in place today, permit reasonable and customary compensation to be paid to agents 

and brokers for the sale of annuity products, leverage existing disclosures, and permit insurers and other 

product manufacturers to engage in commerce and freely receive revenue in a competitive marketplace. 

We seek exemptive relief for fiduciaries that is sufficiently flexible to accommodate the wide range of 

business practices and compensation structures that currently exist to support the sale of annuity 

products. We seek workable, administrable exemptions that provide fiduciaries and their affiliates 

certainty and clearly permit the receipt of reasonable and customary compensation paid for the sale of 

annuity products. Exemptive relief should be both protective of plan participants, beneficiaries and IRA 

owners, and administrable. In our Letter, we offered comments seeking to improve on the proposed 

amendments to Prohibited Transaction Exemption (“PTE”) 84-24. This important exemption has provided 

support for the sale of annuities for over three decades and should continue to be available to support 

the commissioned sale of any and all annuities to plans, plan participants, beneficiaries and IRA owners.

The Department should be mindful of the fact that the cost of doing business is borne by a firm’s 

customers. To keep the cost of operationalizing an exemption low, the Department should consider 

existing laws and regulations. For example, in our Letter, we noted that the Department could minimize 

the cost to administer the Best Interest Contract Exemption by requiring disclosures based on the 

disclosure elements included within ERISA §2550.404a-5 (Fiduciary requirements for disclosure in 

participant-directed individual account plans) and ERISA §2550.408b-2(c) (Reasonable contract or 

arrangement) rather than establishing a new disclosure regime. We also described the robust regime of 

state laws that is protective of plans, plan participants, beneficiaries and IRA owners who are purchasing 

or have purchased insurance contracts.
4

In our Letter, we stressed the need for the Department to revise the proposed BICE to eliminate a phrase 

in Section 11(c)(2) which requires compensation to be tied directly to the cost of providing a service. 

This could be read to prohibit a fiduciary from receiving a commission or fee based on a percentage of 

assets - as such amount would lead to overcharging those with greater amounts involved over those with 

less. We noted that setting compensation based on a percentage of the transaction or assets of the 

account leads to a subsidization by those with more of those with less. For example, a fiduciary that 

receives a 1% commission on a sale or receives 1% for all assets under management will earn three 

times more compensation on a $75,000 transaction or account than a $25,000 transaction or account, 

although the fiduciary may have provided the same services to both accounts

Recently, the Department posted on its website a document entitled “Q&A on Small Savers.” On page 3, 

in answer to the question “will the new rule prevent advisers from providing financial advice to small 

savers,” the document notes that “advisers will still be able to deliver advice to all savers and charge for 

the costs of the advice delivered...”

This indicates that the Department intends for the BICE to permit only compensation arrangements that 

result in a uniform charge for cost of advice services. Thus, using as an example the two transactions 

described above which generate total compensation to the fiduciary of $1,000 (1% of $25,000 plus 1% 

of $75,000) to comply with the final rule and earn the same total compensation, the fiduciary would 

need to change its compensation approach and charge each customer a flat $500 fee. This would 

result in the retirement investor purchasing the $25,000 product paying more than she would under a 

commission-based arrangement, and the investor purchasing the $75,000 product paying less than she 

would under a commission-based arrangement. Of course, such a flat fee arrangement would not give 

rise to a prohibited transaction and thus there would be no need for an exemption.

If we misunderstand the intent of the proposal and the meaning of this Q&A, we urge the Department to 

accept our recommended change to Section 11(c)(2) and revise the Q&A. If not, the Department should 

reconsider the implication of such a policy on small savers and the fact that such position would render 

the BICE useless to fiduciaries. 

A. A Simplified Best Interest Exemption 

 

The proposed Best Interest Contract Exemption (“BICE”) requires that there be a contract between the 

fiduciary, the financial institution and the investor that is enforceable in state court. The exemption is 

contingent on the fact that no misleading statements are made to the investor. 

Insurers are familiar with the idea of an enforceable contract between a financial institution and its 

customer. All annuity owners have contractual rights enforceable against the insurer and recourse to 

state insurance departments and state courts. State laws provide annuity owners with important 

consumer protections. These include state unfair trade practice laws that protect annuity owners from 

false claims and misleading statements. State insurance departments have the authority to enforce 

these protections. For example, all insurance agents and insurance companies must have valid licenses 

to engage consumers. State insurance departments have the authority to revoke these licenses and 

deny an agent the right to sell insurance products and deny an insurance company the right to do 

business in the state. 

During the recent hearings, Deputy Assistant Secretary Hauser asked several witnesses questions 

regarding the potential for revising and simplifying the proposed BICE. As detailed in our Letter on the 

Proposal, the BICE must be revised and re-proposed since, absent substantial changes, it has no utility 

for the insured retirement industry. 
5

ACLI and its members recommend the Department revise and simplify the BICE, utilizing a true 

“principles-based” approach that allows for savers to have continued access to guaranteed lifetime 

income products and (1) ensures that advisers act in the best interest of retirement savers; (2) simplifies 

the “Best Interest Standard; (3) preserves reasonable and customary commission-based compensation 

practices; and (4) provides for a simplified disclosure regime. Such an exemption should include the 

following key elements:

1. A Simplified and Enforceable Commitment to Act in the Retirement Saver’s Best Interest. ACLI and 

its members support a simplified exemption that would require a fiduciary and/or the fiduciary’s 

employer or an affiliate (as defined in the Proposal) to provide retirement savers with a written 

enforceable commitment that, in providing investment guidance and advice, the financial 

professional will act in the saver’s best interest. 

a. Timing. The simplified exemption should provide that the written commitment is required to 

be provided to the retirement saver prior to the commencement of any trading or transaction 

activity. In order to protect any prior recommendations, the written agreement should 

contain a provision that applies the best interest standard to any recommendations made 

prior to the provision of the written commitment to the retirement saver.

As discussed in our Letter, the proposal’s pre-recommendation requirement is impractical 

and incompatible with customary business practices in the financial services industry. It is 

illogical for an adviser to provide a retirement saver with a written commitment to act in the 

retirement saver’s best interest before the parties determine whether to enter into a 

business relationship. Financial professionals often begin their discussions with customers 

with an initial general consultation during which a customer’s needs – and the products and

services provided by the financial professional - are discussed. This is especially true with 

respect to lifetime income products. Financial professionals often introduce savers to 

annuities and explain the various types of lifetime income options available and the value 

proposition associated with each. In such circumstances, neither the financial professional 

nor the retirement saver would reasonably have an understanding that such discussions 

included a “recommendation” or “call to action.” 

b. Parties. As discussed in detail in Section IV(B)(3) of our Letter, it should be sufficient that the 

fiduciary, the fiduciary’s employer or an affiliate (as defined in the Proposal) make the 

binding commitment. Accordingly, the simplified exemption should require only that such an 

employer or affiliate make the best interest commitment, so long as in making such 

commitment, the employer or affiliate assumes responsibility for the actions of the fiduciary 

adviser. A best interest commitment that is enforceable under state law without the 

signature of the retirement saver should satisfy the simplified exemption.

c. Delivery. As discussed above, with respect to new arrangements, we recommend that the 

written best interest commitment be furnished to the retirement saver prior to the 

commencement of any trading or transaction activity. With respect to existing arrangements, 

the simplified exemption should permit the best interest commitment to be furnished 

contemporaneous with any change in the terms of the arrangement between the fiduciary 

advisor and the retirement saver, again without the need for retirement saver to consent to 

the best interest commitment, when such commitment is enforceable under state law 

without such consent. It is simply impractical to require financial professionals to obtain 

signatures to amend existing IRA and other retirement plan agreements. Financial 

professionals should be able to provide their existing customers with written materials 

acknowledging acceptance of their duty and responsibility to act in the best interest of the 

retirement saver.
6

d. Enforceability. The simplified exemption should require that the retirement saver have an 

unequivocal right to enforce the terms of the written commitment. Simply put, if the 

retirement saver believes that, in providing financial advice, the fiduciary did not act in her 

best interest, the retirement saver should be able to take legal steps to enforce her rights. 

Although several witnesses during the hearing recommended that the Department not allow, 

as proposed, a fiduciary adviser and a retirement saver to enter into a pre-dispute binding 

arbitration agreement, we continue to support inclusion of this provision in a simplified 

exemption. 

2. A Simplified Best Interest Standard. During the hearing, several witnesses provided testimony on the 

interpretive problems associated with the language in the proposed BICE definition of “Best Interest” 

requiring the financial professional to act “without regard to the financial interests of the Adviser, 

Financial Institution, or any Affiliate, Related Entity, or other party.” As discussed on our previous 

comment letter, this provision could easily be interpreted to imply that if an adviser has any financial 

interest in the transaction – including receiving a commission associated with the transaction – the 

advisor will have violated the Best Interest Standard.

We believe a simplified definition of “Best Interest Standard” would serve to both protect retirement 

investors and clarify that a financial professional may be compensated. We recommended that the 

simplified exemption include the following definition of “Best Interest:”

Investment Advice is in the “Best Interest” of the Retirement Investor when the Adviser and 

Financial Institution providing the advice act with the care, skill, prudence and diligence that a 

prudent person would exercise based on the investment objectives, risk tolerance, financial 

circumstances, and needs of the Retirement Investor, placing the needs of the Retirement 

Investor before the financial or other interests of the Advisor, Financial Institution, or any 

Affiliate, Related Entity, or other party.

3. A Revised “Reasonable and Customary Compensation” Requirement. As discussed in our Letter, the 

Department uses three different formulations of the concept of “reasonable compensation” within 

the proposed BICE, creating unnecessary and harmful confusion. The revised BICE should require 

that, in order to obtain relief under the exemption, compensation paid in connection with the 

transaction must be “reasonable and customary.” We recommend that the revised exemption be 

clarified as follows with regard to the definition of “reasonable compensation:” 

When providing investment advice to the Retirement Investor regarding the Asset, the 

Adviser and Financial Institution will not recommend an Asset if the total amount of 

compensation anticipated to be received by the Advisor, Financial Institution, and Affiliates 

in connection with the purchase, sale or holding of the Asset by the Plan, participant or 

beneficiary account or IRA, will exceed that which is reasonable and customary for the 

products and services provided to the Retirement Investor, within the contemplation of 

ERISA Sections 408(b)(2) and 408(c)(2) and Internal Revenue Code Sections 4975(d)(2) 

and 4975(d)(10).

Further, as confirmed by Department officials during the hearings, we recommend that the simplified 

BICE clarify that the marketplace serves as a “governor” with respect to the determination of 

reasonable compensation.

4. A Simplified Disclosure Regime. The final key element that should be included in a simplified 

exemption is a useful and meaningful simple point-of-sale disclosure which is based on elements 

found in the ERISA section 404(a)(5) and 408(b)(2) disclosures and other disclosure required by 

federal securities and state insurance law. Many of the elements found in these disclosures overlap 

with the disclosure information required by the Proposal. It is essential that the required disclosure 
7

be meaningful and actionable for retirement investors without overwhelming them with information 

they don’t need – or want – in making investment decisions. It is also important to find a regulatory 

solution that minimizes the cost of compliance. 

B. Re-Propose the Revised Exemptions

In light of the issues raised here and in our Letter, we asked that the Department issue the exemptions 

via a Notice of Proposed Rulemaking. The changes needed to be made to the exemptions are clearly 

material. If the Department intends to make these or other material changes, the public must be 

afforded an opportunity to review and comment on the exemptions before they are issued as final. While 

we have not asked the Department to re-propose the regulation defining fiduciary, we do ask that any 

final regulation be effective no earlier than the effective date of the final prohibited transaction class 

exemptions. 

C. Transitional Good Faith Compliance/Grandfathering Provisions 

 

As proposed, there will be a short 8-month period from the date the final rule and exemptions are issued 

to the time they are applicable. Our Letter stressed the need for additional time to get processes and 

procedures in place to comply with the requirements of the proposed exemptive relief. If the 

Department is not persuaded by our Letter and the comments and testimony of others to provide 

additional time for the effective date of the rule and the applicable exemptions, we ask that the 

Department delay strict compliance with the requirements of final exemptive relief and provide 

fiduciaries and affected financial institutions a sufficient period of time during which compliance can be 

done on a good faith basis. If the requirements for exemptive relief in the final prohibited transaction 

exemptions are materially similar to that of the proposed exemptions, we ask that such transitional good 

faith period be no less than 3 years. For example, to the extent the final exemptions would require 

disclosures not currently required by ERISA §2550.404a-5 (Fiduciary requirements for disclosure in 

participant-directed individual account plans) and ERISA §2550.408b-2(c) (Reasonable contract or 

arrangement), the Department should provide for a delayed compliance date for such disclosures that 

offers sufficient time to work. Again, absent material changes to the disclosure requirements, we ask 

that such transitional good faith compliance date be no less than 3 years from the issuance of the final 

exemptions.

Additionally, as discussed in our Letter, we urge the Department to make application of a final 

regulation, including changes to existing prohibited transaction exemptions, prospective only to apply to 

fiduciary advice with respect to retirement accounts opened or insurance contracts issued after the 

regulation’s compliance date. An effective grandfathering provision is especially important for 

commission-based annuity contracts, as retirement investors may have already paid for services – and 

application of the regulation retroactively would likely result in such investors incurring additional

expenses to transition to a fee-based arrangement. 

III. Post-Hearing Observations on the Regulatory Impact Analysis 

 

A. Annuities Missing in RIA Calculus 

One thing is uniformly consistent in the Proposal’s preamble, the Regulatory Impact Analysis (“RIA”), the 

economic studies supporting the RIA and the hearing transcript: they all ignore the comprehensive scope 

of consumer-protective regulation governing the sale of annuities, and fail to translate the unique impact 

of the initiative on annuities. 

ACLI noted during the hearing that, although the initiative mention annuities a total of 172 times and 

acknowledge that “31 percent of IRAs include investments in annuities” and that “insurance companies 
8

[will] be significantly affected by the proposal,” the cost-benefit analysis makes no attempt to examine 

the impact of the proposed rule on annuities, advisers, insurers, or retirement savers using them. 

Neither the hearing transcript nor four economic studies posted after the hearing reveal any additional 

analysis or information about the proposed rule’s impact on retirement savers using annuities, on 

advisers recommending annuities, or on annuities’ role in retirement security. The RIA, therefore, 

continues to fail the statutory, administrative and judicial requirements that federal agency rulemaking 

conduct a meaningful cost-benefit analysis. Collectively, these rulemaking standards ensure that federal 

agencies “strike the right balance,” and develop “more affordable, less intrusive rules to achieve the 

same ends--giving careful consideration to benefits and costs.”2

B. The Proposal’s Unsubstantiated Bias Toward Fee-Based Advice 

During the hearing, ACLI emphasized that the proposal was built on two false premises: (i) all 

commissioned advice is conflicted and (ii) all fee-based advice is unconflicted and always serves 

retirement savers’ best interest. The RIA failed to properly support these assumptions and nothing in the 

hearing transcript bolstered them further. As we noted during the hearing, formidable and independent 

regulators have observed that fee based advice is not always in the customer’s best interest. Rather, the 

appropriateness of commissioned advice and fee-based advice should be evaluated based on the 

unique facts and circumstances of each retirement saver. Commissioned advice should not, therefore, 

be effectively barred through the Department’s Proposal. 

In a very relevant point of reference, FINRA issued guidance about fee-based arrangements, recognizing 

that while fee-based programs are beneficial for some customers, “they are not appropriate in all 

circumstances.”3 FINRA instructs that 

Firms must consider the overall needs and objectives of the customer when determining the 

benefits of a fee-based account for that customer, including the anticipated level of trading 

activity in the account and non-price factors such as the importance that a customer places on 

aligning his or her interests with the broker. Additionally, firms must take into account the nature 

of the services provided, the benefits of other available fee structures, and the customer's fee 

structure preferences.4

As FINRA aptly observes, depending upon customer circumstances, compensation through commission 

arrangements may be more appropriate than fee-based arrangements. Quite correctly, FINRA explained 

that the appropriateness of fee-only financial arrangements should be evaluated on the unique 

circumstances of each customer and their financial needs. The same is true with evaluations of 

commissioned recommendations to purchase annuities. Assets under management on which the 

annual, recurrent fees are assessed under fee-only financial arrangements may not always serve 

customers’ best interest. 

On this point, Elisse B. Walters, who served as acting SEC chair, SEC Commissioner, and FINRA Senior 

Executive Vice President, critically noted:

In a nutshell, while fee based accounts can be a good thing, they are not always the right thing, 

or the best thing. We need you to look at each customer and determine what kind of fee works

best for him or her. The Tully Report itself recognized that investors with low trading activity 

 2 Op-Ed, President Barak Obama, Toward a 21st Century Regulatory System, Wall Street Journal (Jan. 18, 2011). The President’s 

Op-Ed coincided with his issuance of Executive Order 13,563, which set strict standards for cost-benefit analysis in federal 

agency rulemaking.

3 See Notice to Members 03-68, Fee-Based Compensation-NASD Reminds Members That Fee-Based Compensation Programs 

Must Be Appropriate, http://www.finra.org/sites/default/files/NoticeDocument/p003079.pdf . 4 See Fee-Based Questions and Answers, http://www.finra.org/industry/fee-based-account-questions-answers . 
9

would probably be better off with a commission-based program that charges only when trades 

are made.

So how do you decide what is the best fee structure for your customers? NASD [now called 

FINRA] states that it is inconsistent with just and equitable principles of trade to put your 

customer in a fee structure that can reasonably be expected to result in a greater cost than 

alternative account that provides the same services and benefits to the customer. We believe 

that cost is an important factor, but not the only one. Other factors include the objectives of the 

customer, including the anticipated trading and non-price factors such as aligning their interests 

with those of the broker.

You need to determine that such an account is appropriate by making reasonable efforts to get 

information about the customer that will allow you to gauge the right kind of fee, based on the 

services provided, the cost, the alternatives, and the customer's preferences. You also need to 

tell the customer about the fee based structure and what it means. And you need to set up 

supervisory procedures to review those fees - we recommend annually - to make sure that they 

stay appropriate over time.5

Ms. Walter’s statement objectively concludes that, depending upon customer circumstances, fee-only 

investment advice is not advisable or worthwhile. Quite correctly, she explained that the appropriateness 

of fee-only financial arrangements should be evaluated on the unique circumstances of each customer 

and their financial needs. The same is true with evaluations of commissioned recommendations to 

purchase annuities in a retirement context. 

Importantly, regulators have provided strict guidance on managing conflicts in recommendations to 

customers. In 2013, FINRA published a Report on Conflicts of Interest6 in the broker-dealer industry to 

highlight effective conflicts management practices. In this endeavor, FINRA published examples of how 

some broker-dealers address conflicts to help broker-dealers analyze the conflicts they face and 

implement a conflicts management framework appropriate to the size and scope of their business. The 

report highlights approaches to managing conflicts that firms can apply across their business, and 

explained that there is no one-size-fits-all framework for conflict management.

Interestingly, in 2008 the RAND Corporation issued a report7 following a study conducted for the SEC on 

the services and functions of broker-dealers and investment advisers. The study followed judicial 

rejection of Rule 202(a)(11)-1 under the Investment Advisers Act, a rule that sought to delineate the 

regulatory status of these securities professionals in a contemporary marketplace. On the relative 

presence of fee-based advice compared to commissioned advice, the 2008 Rand Report observed:

Not surprisingly, the primary form of compensation is based on a percentage of assets under 

management. More than 97 percent receive such compensation, and the share is even higher 

among the 98 percent of firms that report providing “continuous and regular supervisory or 

management services to securities” (language from SEC, 2006). The second-leading form of 

compensation is “fixed fees (other than subscription)” (language from SEC, 2006), which are 

reported by 50 percent of advisers with individual clients, followed by hourly fees (44 percent). 

Only 13 percent of these advisers reported receiving commissions. In fact, more of these 

advisers (20 percent) reported receiving performance-based fees than reported receiving 

commissions.8

 5 See Elisse Walters, Current NASD Regulatory Issues on Sales and Marketing (Sept. 28, 2004) 

http://www.finra.org/newsroom/speeches/092804-remarks-27th-annual-sia-sales-and-marketing-conference.

6 See http://www.finra.org/industry/2013-report-conflicts-interest . 7 See https://www.sec.gov/news/press/2008/2008-1_randiabdreport.pdf . 8 Id. at 40.
10

This report was authored by Dr. Hung, who was also an author of three of the four economic studies 

commissioned by the Department and posted after the hearing, and was an author of two of the 

documents identified by the Department as supporting the RIA. Significantly, the 2008 RAND Report 

concludes that most advisory compensation is fee based and that only 13% of advisers reported 

receiving commissions. These conclusions suggest that the Department’s concerns about the presence 

of commissioned advice to retirement savers may be overstated and of disproportionate concern.

In sum, the RIA fails to properly quantify and balance the different approaches to providing advice under 

the proposal. Consequently, the RIA does not fulfill the explicit judicial, statutory and administrative 

requirements to conduct a complete and balanced cost-benefit analysis. 

C. Harm to Small and Moderate Retirement Savers 

ACLI explained during the hearing that the RIA fully overlooked the proposal’s harm to small businesses 

and small to moderate balance retirement savers. We noted that the RIA extoled a parallel 2013 

initiative in the UK and cited a significant reduction in commissioned advice, glaringly failed to 

acknowledge an even greater drop in advice to retirement savers following the UK experiment. In 2014, 

Morningstar UK reported that eleven million investors have fallen through an ‘advice gap’ following 

industry regulation. The week before the hearings on the proposal, the UK launched a comprehensive 

review of its regulations and its abandoned retirement savers in response to this severe problem. During 

the hearing, none of the economists or the Department staff acknowledged the rather shocking reversal 

of position in the UK program that the Department had highlighted to justify the proposal. The 

Department’s silence on the sinking status of the UK proposal that was a linchpin in the proposal is 

deafening. Failure to discuss the negative implications of the proposal in light of the documented advice 

gap to UK retirement savers undermines the integrity of the RIA. 

D. The Disregard of Comprehensive Patterns of Regulatory Protection 

The proposal’s preamble asserted that current regulatory protections are inadequate to address its 

concerns about advice to retirement plan participants. During the hearing, ACLI disagreed with the 

preamble’s wholesale disregard of detailed systems of significant protection from the RIA or the

preamble. Nothing in the studies supporting the RIA or the four studies posted after the hearing consider 

the unique and comprehensive regulations governing the sale of annuities.

As one example of this significant oversight, our testimony highlighted the fact that recently enhanced 

FINRA regulations governing variable annuity suitability, supervision and non-cash compensation were 

outside the scope of the RIA’s assessment of need. Likewise, parallel regulations under state insurance 

laws were fully omitted. Our submission provided 269 pages highlighting the comprehensive scope of 

state and federal regulation of annuities. We emphasized the NAIC Annuity Buyers Guide as an excellent 

source of plain-English, streamlined disclosure about the mechanics of fixed, index and variable 

annuities that includes full discussion of fees and charges and provides a series of detailed questions 

for consumers to ask salespersons. Nothing further appeared about these matters in the hearing from 

the Department staff, other witnesses or in the economic studies posted after the hearing. The RIA 

continues to be deficient through its dismissal of significant patterns of regulatory protection for 

retirement savers in purchasing annuities. 

E. Surrender Charges are Misrepresented. 

ACLI explained during the hearing that, with respect to surrender charges associated with insurance 

products like annuities, the Department’s public statements assumed that:

• all annuities have surrender charges; 

• full surrender charges are applied 100% of the time;

• all surrenders are for the full amount of the annuity; and,
11

• annuity contracts never waive surrender charges in cases of hardship.

We emphasized that none of these presumptions were correct. Surrender charges are contingent 

deferred sales charges, meaning that if the customer holds the contract for the surrender period, which 

is usually 7 years, then there is no surrender charge. 

Since the Department’s discussion of surrender charges was based on anecdotal information, ACLI 

commissioned NERA to examine the incidence of surrender charges in a sample of 237,000 variable 

annuity contracts representing 30% of variable annuity reserves. NERA’s report9 was published August 8 

and found: 

• 76% of those firms surveyed offer contracts with no surrender fee;

• The average surrender charge on any surrender (partial or full) is 0.8% or .008 in decimal 

notation.

• Of the accounts with surrenders, approximately 23,000, or 70%, are IRA accounts.

o For IRA variable annuities only, the average surrender fee paid on any partial withdrawal 

or full surrender is even lower, at 0.6% or .006;

o 78.6% of withdrawals in IRA accounts paid 0% in fees.

Nothing about this type of data was considered in the four economic studies posted after the hearing or 

in the economic studies the Department identified as supporting the RIA. A proper understanding of 

surrender fees needs to be part of the conversation on the Proposal and the RIA. 

 

F. The Department Questions about Arbitration 

During the first day of the hearings on the proposal, the Department staff asked several witnesses 

whether annuities would be subject to pre-dispute arbitration agreements. None of the witnesses had 

specific expertise about annuities and, therefore, were unresponsive to the question. Ironically, the same 

Department staff did not raise this question with ACLI witnesses on other days of the hearings or with 

other witnesses with insurance product expertise. 

The answer to the Department’s question is that individual variable annuity contracts can only be sold by 

a registered representative of a broker-dealer subject to FINRA regulation. Typically, most broker-dealers’ 

customer account agreements provide that both parties remedy in the event of dispute is binding 

arbitration under the FINRA arbitration process. The drift of the Department’s questions about arbitration 

suggested that it was an insufficient consumer remedy. The U.S. Supreme Court upheld the validity of 

binding arbitration in broker-dealer customer account agreements in the case of Shearson American 

Express v. McMahon, 482 U.S. 220 (1987)10. The tone of the Department staff’s comments reflects a 

potential misunderstanding of the FINRA arbitration process, which is designed to provide a quick, lowcost forum for the resolution of customer disputes. Customers are not required to have a lawyer for 

representation in FINRA arbitrations, and FINRA arbitrators do not impose the rules of evidence on 

customers representing themselves.11

 9 See https://www.acli.com/Newsroom/News%20Releases/Pages/NR15-043.aspx . 10 See https://supreme.justia.com/cases/federal/us/482/220/case.html 11 FINRA operates the largest securities dispute resolution forum in the United States, and has extensive experience in providing 

a fair, efficient and effective venue to handle a securities-related dispute. The resolution of problems and disputes is 

accomplished through two non-judicial proceedings: arbitration and mediation. Arbitration and mediation are two distinct ways 

of resolving securities and business disputes between and among investors, brokerage firms and individual brokers, and offer a 

prompt and inexpensive means of resolving issues.
12

Typically, FINRA has a panel of one to three arbitrators in disputes between customers and brokerdealers depending on the size of the dispute.12 FINRA uses the Neutral List Selection System (NLSS) to 

generate random lists of arbitrators from FINRA's arbitrator rosters to appoint a panel. Generally, the 

arbitrator selection process begins after the answer is due, regardless of whether the respondent 

answers a claim. After the answer is due, FINRA will use the NLSS to generate list(s) of arbitrators, which 

will include their background information, called arbitrator disclosure reports. FINRA will send the lists 

and arbitrator disclosure reports to the parties for their review. Parties will review the information, strike 

any arbitrators from the lists that they do not want on their panel, and rank the remaining choices. After 

parties have ranked their choices, they submit their ranked lists to FINRA. FINRA combines the parties' 

ranked lists and appoints the highest ranked available arbitrator from each list to serve on the panel. 

Consumers can also appeal the arbitration under certain circumstances. The SEC exerts careful 

oversight regarding the integrity and fairness of the FINRA arbitration process. FINRA arbitration, 

therefore, is designed to be an impartial forum for customer disputes that is faster and cheaper to utilize 

than the judicial system. The Department staff’s questions about the merits and fairness of the 

arbitration process during the first day of the hearing implicitly conveyed misinformed regulatory 

concern.

Customers of a broker-dealer may also file a written complaint through FINRA’s complaint program.13

FINRA investigates complaints against brokerage firms and their employees. FINRA is empowered to 

take disciplinary actions against brokers and their firms. Sanctions may include fines, suspensions, a 

barring from the securities industry or other appropriate sanctions. 

Additionally, it is important to note that an integral part of a state insurance department’s role is to 

protect consumers from illegal insurance practices by ensuring that insurance companies and producers 

act in accordance with state insurance laws. All states have Consumer Complaint Departments to 

investigate consumer complaints. In each case, the state will review the information obtained in the case 

to make sure that the company or agent has complied with statutes, regulations and the terms of policy 

contracts. If the Insurance Department determines that the actions of the insurance company or agent 

are in violation of a statute, regulation or policy the Department may take or order corrective action 

which includes restitution and revocation of agents’ and insurers’ licenses, among other things. Action 

against an insurance company can trigger a for cause market conduct examination to rectify systemic 

problems. Consumers can appeal the department’s decision to the courts. The laws supporting the 

complaint process include: unfair trade practices acts, market conduct and licensure, among others.

G. Observations about the “Four Additional Research Papers” 

On August 26, 2015, the Department posted three “additional research papers” on a segment of it 

website, entitled “conflict of interest proposed rule.” On September 8, 2015, the Department posted 

another -“additional research paper” there.14 The Department announced the posting of these four 

additional papers on September 8, 2015. The status of those additional research papers on the 

proposal is unclear. In choosing to post the four papers on the proposal’s web space, the Department 

apparently thought the papers were integral to its overall regulatory package. However, nothing explains 

the exact role of the four additional research papers on the proposal. It is unequivocally confusing 

whether these documents are part of the proposal or its regulatory impact analysis. That is unacceptable 

under federal agency rulemaking.

 12 Generally, for claims of more than $50,000 up to $100,000, the parties will select and FINRA will appoint one arbitrator, 

unless the parties agree in writing to three arbitrators. For claims of more than $100,000, the parties will select and FINRA will 

appoint three arbitrators. See http://www.finra.org/arbitration-and-mediation/arbitrator-selection 13 See http://www.finra.org/investors/file-complaint#sthash.RZY3KcaR.dpuf. 14 See http://www.the Department.gov/ebsa/regs/conflictsofinterest.html
13

As a matter of administrative process, the four additional research papers create troubling challenges. 

When the Department posted the hearing transcripts on September 8, 2015, it set a supplemental 

comment period of 16 days expiring September 24, 2015. The first time the Department publicly 

announced the posting of the “additional research papers” occurred on September 8, 2014, when it 

published its hearing transcripts. Collectively, the four added papers total 118 pages of highly technical 

material. The 16-day review period for analyzing the research papers is fundamentally inadequate. 

Moreover, this overlaps with the 16-day review period of the 1305 page hearing transcript. In short, this 

significantly abbreviated period to review the four “additional research papers” with uncertain 

administrative status offends reasonable practices for federal agency rulemaking.

Neither the Administrative Procedure Act (“APA”)15 nor the Department’s administrative procedures 

establish a “standard” period of comment on rulemakings. Rather, the goal of robust public comment on 

administrative rulemakings is best served by selecting a time period based on the unique factors and 

complexity of the individual initiative, and not “routine” practices. Some proposals should properly have 

longer comment periods than others. 

The special time burdens confronting regulated industries and large organizations in digesting regulatory 

proposals were explicitly recognized by the Administrative Conference of the United States in its 

publication entitled A Guide to Federal Agency Rulemaking16 (“Guide”), which notes that: 

[i]nterested persons often are large organizations, which may need time to coordinate an

organizational response, or to authorize expenditure of funds to do the research needed to 

produce informed comments.17 

The Guide reviews the legislative history of the APA and emphasizes that the notice of proposed 

rulemaking “must be sufficient to fairly apprise interested parties of the issues involved, so that they 

may present responsive data or argument.” 18 The Guide further explains that rules developed through 

notice and comment procedures must be rational, and that notice and opportunity for comment under 

§553 of the APA should properly “give interested persons a chance to submit available information to an 

agency to enhance the agency's knowledge of the subject matter of the rulemaking.”19 The Guide also 

points out that “informal rulemaking procedures should provide interested persons an opportunity to 

challenge the factual assumptions on which the agency is proceeding and to show in what respect such 

assumptions are erroneous.”20

The Department’s late-circulated economic studies are relevant to the proposal’s Regulatory Impact 

Analysis. The short period to review the economic studies is inadequate for such a complex rulemaking 

and conflicts with APA rulemaking standards requiring reasonable opportunity for comment, especially 

concerning regulated industries and large organizations as emphasized in the Guide to Federal Agency 

Rulemaking.21 The Department’s deficient process regarding the belated economic studies exposes the 

initiative to legal challenge under the APA. 

 15 See Guide at 196. 16 See, A Guide to Federal Agency Rulemaking (1983) at 124. The American Bar Association updated and republished this Guide

in 1998. See Lubbers, A Guide to Federal Agency Rulemaking, Third Edition (1998), American Bar Association, Government and 

Public Lawyers Division and Section of Administrative Law and Regulatory Practice. Subsequent citations to the Guide are to the 

updated and revised ABA publication. 

17 See Guide at 196. 18 Administrative Procedure Act: Legislative History, S. Doc. No. 24879-258 (1946) [hereinafter legislative history of the APA]. 19 See Guide at 197. 20 Id. at 182 and 196. 21 Curiously, although the RAND study conducted for the Department entitled Effective Disclosures in Financial Decision-Making

has a publication date of July 2015, it was not posted on the Department website until August 26, 2015. Through this delay, the 

posting of the report has a disturbingly stealth-like character. 
14

Industry groups like our trade association circulate regulatory proposals, elicit membership input, 

develop a consensus, and circulate draft letters of comment before submission. This worthwhile, but 

time intensive, process is exceptionally difficult to execute in the short time window of 16 days, 

particularly given the scope and depth of the studies and their interconnection with the proposals’ 

Regulatory Impact Analysis. The belated posting of the studies to the Department website thwarts 

meaningful analysis of those studies and burdens further review of the initiative’s RIA.

Given the substantive depth of the economic studies and the unacceptable short comment period, ACLI 

was denied the opportunity to conduct extensive analysis. Accordingly, we can only offer our initial, 

preliminary observations. The “four additional research studies” were produced by the Rand Corporation 

(Burke and Hung (2015); Hung, Gong and Burke (2015); and, Burke and Hung (2015b)) and one by the 

Advanced Analytical Consulting Group (Panis (2015)).22, 23 The four reports present literature reviews, 

commentary on the work of another consulting firm (NERA), and a comparison of the regulatory 

environment and market for financial advice in five countries (the U.S., the U.K., Australia, Germany, and 

Singapore) and the E.U. It is important to note that none of the studies were peer reviewed. All simply 

reflect the independent and unverified research of the authors. 

As pointed out in our Letter, the Proposal would lead to a substantial decline in the number of financial 

advisers and an increase in the cost of advice. Lower and middle income investors would be most 

affected and would be forced to rely on robo-advisors or manage their own investments. As mentioned 

earlier, automated financial advice is not a sufficient substitute for a human being and cannot offer 

benefits such as encouraging greater savings, dissuading emotional investing (particularly the liquidation 

of assets in a market downturn), or addressing client-specific questions and concerns. 24, 25 

The Department’s RIA entirely failed to examine the various benefits of using a financial adviser and how 

the loss of these benefits would impact retirement security. Burke and Hung (2015) attempt to fill this 

gap by investigating whether financial advisers actually offer such benefits, focusing primarily on 

saving.26 They examine nine studies, eight of which found a strong correlation between the use of an 

adviser and saving. Some of the more compelling results include:

• Martin and Finke (2014) found that “those who had calculated retirement needs and used a 

financial planner generated more than 50 percent greater savings than those who estimated 

retirement needs on their own without the help of a planner (p. 52)”.27

 22 Burke, Jeremy; Hung, Angela A., “Do Financial Advisers Influence Savings Behavior?”, RAND Labor and Population, RR-1289-

DOL, prepared for the U.S. Department of Labor, August 2015; Hung, Angela A.; Gong, Min; Burke, Jeremy, “Effective 

Disclosures in Financial Decision-Making”, RAND Labor and Population, RR-1270-DOL, prepared for the U.S. Department of 

Labor, July 2015; Burke, Jeremy; Hung, Angela A., “Financial Advice Markets: A Cross Country Comparison”, RAND Labor and 

Population, RR-1269-DOL, prepared for the U.S. Department of Labor, April 21, 2015; Panis, Constantijn W.A., “Comments on a 

Review of a White House Report on Conflicted Investment Advice”, Advanced Analytical Consulting Group, August 21, 2015. 23 Panis (2015), Burke and Hung (2015b), and Hung et al. (2015) were posted on August 26, 2015; Burke and Hung (2015) 

was posted on September 8, 2015.

24 See ACLI comment letter, July 21, 2015, at 47. 25 In fact, the most common client questions human advisors deal with are those regarding market downturns. If financially 

sophisticated investors need to be reassured by their adviser when facing market downturns, how well will a computer program 

fare with poorer, lower income, less educated, younger, and/or less financially sophisticated investors?

26 It should be noted that the authors make several contradictory statements in their analysis. For example, in their introduction 

they state that “[f]inancial advisers can play an important role by helping individuals make better financial decision and 

improving their financial situations. However, there is limited and mixed evidence about the benefits to using a financial 

adviser”. If, in their opinion, there is limited and mixed evidence about the benefits to using a financial adviser, how can

financial advisers play an important role in improving a client’s financial situation? 27 Martin, Terrance K., Jr; Finke, Michael, “A Comparison of Retirement Strategies and Financial Planner Value”, Journal of 

Financial Planning, vol. 27, no. 11, pp 46-53, 2014.
15

• Using 2010 Survey of Consumer Finances data, Hudson and Palmer (2014) found “a significant 

and positive relationship between the use of information from formal advisors and the 

acceptable savings behaviors of low-income employees, and a significant and positive 

relationship between the use of information from formal advisors and the cash-flow 

management behaviors of low-income employees (p. 41)”.28

• Using 2004, 2007, and 2010 Survey of Consumer Finance data, Smith and Griesdorn (2014) 

find that “seeking the advice and knowledge of a financial planner can help self-employed 

families navigate the complexity of tax-deferred retirement vehicles and establish the best 

savings plan for their unique situation (p. 58)”.29 

• Based on a survey of 1,003 randomly sampled households with a median income of $75,000 or 

more, Leonard-Chambers and Bogdan (2007) found that those respondents with ongoing 

advisory relationships received the following services from their advisers: regular portfolio review 

and investment recommendations (85 percent); review of allocation of investor’s employersponsored retirement plan assets (61 percent); periodic discussion of financial goals (83 

percent); planning to achieve specific goals, such as saving for college (75 percent); 

comprehensive financial planning (75 percent); managing assets in retirement (60 percent); 

access to specialists in areas such as tax planning (51 percent; five or more services (63 

percent).30 

• Winchester and Huston (2014) found that individuals who felt they did not have control of their 

finances were considerably more likely to achieve their financial goals when using a financial 

adviser.31

• Chatterjee, Salter, and Harness (2011) found that using the services of a financial planner 

increased the likelihood of retirement confidence by 136 percent among the lower income 

individuals and by 56 percent among higher income individuals.32

Despite these findings, Burke and Hung (2015) imply that using an adviser may not result in greater 

saving since “the same underlying characteristics make an individual more likely to seek out financial 

advice and more likely to save” (Burke and Hung (2015, p. 12)). If this were indeed the case, then the 

value of using a financial adviser may be questionable. However, the authors identified only one study, 

Mardsen, Zick, and Mayer (2011), to support their claim. Marsden, Zick, and Mayer (2011) do find that 

using a financial adviser does not increase savings, however, their study is based on a survey of 2,191 

employees of a “large mountain west university”, which is clearly not representative of the entire U.S.33 

This study should be discounted.

Burke and Hung (2015) also overlook the obvious fact that financial advisers encouraging their clients to 

save more is in the best interest of both parties. The studies listed above suggest that this is indeed the 

case. Both the Department’s RIA and Burke and Hung (2015) missed that point. 

 28 Hudson, Crystal R.; Palmer, Lance, “Low-Income Employees: The Relationship Between Information from Formal Advisors and 

Financial Behaviors”, Financial Services Review, vol. 23, no. 1, pp. 25-43, 2014. 29 Smith, Hyrum L.; Griesdorn, Tim, “Do Savings Rules Influence Self-Employed Households’ Participation in Tax-Deferred 

Retirement Plans?” Family and Consumer Sciences Research Journal, vol. 43, no. 1, pp. 47-60, 2014. 30 Leonard-Chambers, Victoria; Bogdan, Michael, “Why Do Mutual Fund Investors Use Professional Financial Advisors?” 

Investment Company Institute, Research Fundamentals, vol. 16, no. 1, April 2007. 31 Winchester, Danielle; Huston, Sandra J., “Does a Relationship with a Financial Service Professional Overcome a Client’s 

Sense of Not Being in Control of Achieving Their Goals?”, Financial Services Review, vol. 23, no. 1, 2014. 32 Chatterjee, Swarnankur; Slater, John R.; Harness, Nathaniel J., “Financial Confidence Among Retirees: The Role of Financial 

Advice and Planning Duration”, Economics Bulletin, vol. 31, no. 1, pp. 315-323, 2011. 33 Marsden, Mitchell; Zick, Cathleen D.; Mayer, Robert, “The Value of Seeking Financial Advice”, Journal of Family and Economic 

Issues, vol. 32, no. 4, pp. 625-643, 2011.
16

Based on their literature review, Burke and Hung (2015) conclude that wealthier, higher income, more 

educated, older, and/or more financially literate individuals are more likely to seek and receive financial 

advice. If these findings are valid, they call into question the validity of the Department’s RIA. As 

mentioned in our Letter at page 43, the Department’s RIA hinges on the implicit assumption that an 

investor will hold a poorly performing mutual fund for an extended period of time. If investors who use 

financial advisers are more knowledgeable, experienced, and sophisticated than those who merely own 

indexed funds, there is no reason to believe they would hold sub-optimal investments for an extended 

period of time or maintain a working relationship with an adviser who charges excessive fees or 

continually steers them toward poorly performing investments. Market forces quickly correct such 

inefficiencies and promptly drive such advisers out of business, negating the need for the Department’s 

Proposal. 

In sum, the information in the four economic studies posted after the hearing are unpersuasive on the 

issues under study and particularly with regard to advice about annuity purchases in a retirement 

context. 

********* 

On behalf of the ACLI member companies, thank you for consideration of these comments. We 

welcome the opportunity to discuss these comments and engage in a productive dialogue with the 

Department on this Proposal.

Respectfully,

James H. Szostek Howard M. Bard